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SEC Filings Shed Light on Calando Cash Infusion; USPTO Backs IP Covering Core Technology

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Filings with the US Securities and Exchange Commission submitted by Arrowhead Research last week revealed additional details about the company's recent commitment to invest $10 million in subsidiary Calando Pharmaceuticals.

The filings detail the milestones Calando must reach in order to trigger payments, as well as the amount of cash and stock comprising the investment.

Separately this week, the US Patent and Trademark Office issued a patent covering a method of preparing therapeutic compositions that is at the heart of Calando's RNAi drug program.

The patent was issued to Arrowhead subsidiary Insert Therapeutics and the California Institute of Technology. Calando has a license to the patent and other Insert technology for use in the RNAi field.

The Money

Last week, Calando announced that Arrowhead had agreed to provide the company with an additional $10 million in funding, which would "allow Calando to accelerate preclinical testing of its RNAi therapeutics and to facilitate additional collaborations with large biotech and pharmaceutical companies" (see RNAi News, 4/6/2006).


In order to receive the additional $7 million from Arrowhead, Calando must achieve a series of regulatory milestones, including the filing of an IND with the US Food and Drug Administration.

Calando CEO John Petrovich told RNAi News at the time that the cash puts Calando "in the position to maintain [its] independence a little more … as opposed to having to necessarily get into a collaboration," although the company is still interested in striking partnerships.

Details about the funding were not immediately available when Calando made its announcement, but in filings with the SEC Arrowhead disclosed additional aspects about the financing agreement.

According to the SEC filings, Arrowhead initially purchased 5 million shares of Calando series A preferred stock for an initial investment of $3 million. Arrowhead also said it separately entered into agreements with Petrovich, Calando co-founder and CalTech researcher Mark Davis, and other "minority common stockholders of Calando" to acquire 984,000 shares of the company at $2 each for a total purchase price of roughly $1.97 million. This payment comprised $890,668 in cash and 208,382 shares of Arrowhead.

Following these transactions, Arrowhead increased its stake in Calando to approximately 83.17 percent.

In order to receive the additional $7 million from Arrowhead, Calando must achieve a series of regulatory milestones. Specifically, Calando will receive $1 million when it starts investigational new drug application-enabling studies for its first internally developed RNAi therapeutic candidate.

In February, Calando formed a collaboration with the National Cancer Institute to develop RNAi-based therapies for neuroblastoma, a malignancy that forms in the nerve tissues of the adrenal glands, neck, chest, or spinal cord, and typically develops during early childhood (see RNAi News, 2/9/2006).

This effort, however, does not mark an official program in Calando's pipeline. The company has not yet disclosed its first in-house drug-development program, although Petrovich has told RNAi News that it would likely be in oncology and that details would likely be disclosed "some time by the summer."

Calando stands to receive another $3 million from Arrowhead when it files an IND with the US Food and Drug Administration to begin clinical testing of its "first internally developed RNAi therapeutic."

The final $3 million will be given to Calando when it either submits documents to the FDA "to request approval to commence phase II clinical trials for an internally developed RNAi therapeutic," or when it files an IND for a second RNAi therapeutic either developed in-house or through a collaboration, according to the SEC filings.


"Arrowhead intends to maintain focus on creating barriers to entry through patent protection in these key technology areas."

In the event that one or more of the milestones are not met, Arrowhead said in the filings that it may still contribute all or a portion of the $7 million of additional capital to Calando.

Officials from Calando did not respond to a request for comment.

The Patent

The patent awarded to Insert and CalTech • No. 7,018,609 • is entitled "Compositions Containing Inclusion Complexes," and covers "methods of preparing new therapeutic compositions by assembling drug agents, cyclodextrin-containing polymers, and compounds that provide stabilization and targeting abilities," according to Arrowhead.

"The assembly of the new compositions occurs through the formation of inclusion complexes between the cyclodextrin-containing polymers and the stabilizing/targeting agents," the company added. "These interactions do not involve the formation of strong chemical bonds and thus provide new ways of PEGylating and targeting that distinguish this technology from other patented approaches to the stabilization and targeting of small-molecule, protein, and nucleic acid therapeutics."

The technology was developed in part by CalTech researcher Mark Davis, who co-founded both Insert and Calando. While Insert had originally been using the technology for RNAi applications, Arrowhead formed Calando about a year ago in order to create a pure-play RNAi drugs firm (see RNAi News, 2/25/2005).

"The patent strengthens our competitive position as we bring both small-molecule therapeutics [through] Insert and RNAi therapeutics [through] Calando to market," R. Bruce Stewart, Arrowhead's chairman, said in a statement. "Arrowhead intends to maintain focus on creating barriers to entry through patent protection in these key technology areas."

Despite Stewart's comments, it appears that there is a way past these "barriers to entry": a licensing deal.

Last June, Arrowhead announced that Calando exclusively licensed the rights to use its proprietary polymeric nucleic acid delivery technology to Benitec for use in the development of an RNAi-based hepatitis C therapy (see RNAi News, 6/24/2005). In exchange, Calando was paid an upfront fee, and stands to receive milestones and royalties.

Officials from Arrowhead were not available for comment.

- Doug Macron ([email protected])